Kinko’s copy shops were once so ubiquitous that the name became a kind of shorthand for photocopying. Paul Orfalea started the first shop in 1970 in a tiny converted hamburger stand near UC Santa Barbara, called it Kinko’s after his childhood nickname, and eventually grew it into a sprawling global chain.   

Rather than relying on a franchise model, Paul partnered with co-owners, which often made it hard to keep the business on track. Far-flung owners couldn’t agree about the basics of logo design or the complexities of keeping stores open 24 hours. In 2004, Kinko’s was acquired for $2.4 billion by FedEx, which eventually shed the name and transformed the shops into today’s FedEx Office locations.

This episode was produced by Chis Maccini and edited by Neva Grant, with music by Ramtin Arablouei. Our audio engineer was James Willetts. 

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Hey, before we start the show, I want to share something I heard recently from actress Audra MacDonald.

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Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

I'm Guy Raz, and on the show today, how Paul Orfalea rented a Xerox machine for $1, 100 a month and grew a single store into a global photocopy shop with an instantly recognizable name, Kinko's.

Kinko's played a pretty important role in my professional life.

In high school, I used to race to the Kinkos in Northridge, California, sometimes at 1 or 2 in the morning to print out projects that were due just a few hours later to my English class.

In college, once again, I'd race to a Kinko's in the middle of the night, get a portfolio of my articles spiral bound, and sent off to newspapers just in time to meet their application deadlines for internships.

When I applied to be a radio reporter in 2000, just minutes before the deadline, I raced to a Kinko's in Washington, D.C.

At 4 in the morning to get my resume and articles all printed out.

Kinko's enabled me and probably millions of other people to put off projects, applications, and presentations to the very last minute and still somehow make them look pretty good.

For more than 3 decades, Kinko's copy shops were scattered all over the world, and the business started out with a single 100-square-foot shop and a large Xerox machine across the street from the University of California in Santa Barbara.

This was in the early 1970s, and the idea came to Paul Orfalea because he saw a long line, a long line of people waiting to get photocopies at a shop in Los Angeles.

And like many entrepreneurs before and after him, Paul thought to himself, if there's a long line, that must be a business worth looking into.

The beauty of Kinko's, and we'll get to why Paul called it Kinko's later in the show, but the beauty of it was that it required very little startup capital.

And Paul realized that he could capture a large share of the market by opening his shops near colleges and universities.

Eventually, it turned Kinko's into a business that was acquired by FedEx for $2.4 billion.

Paul grew up in Los Angeles in the 1950s.

He comes from a family of Lebanese American entrepreneurs.

And as a kid, he knew he wanted to start a business as well.

Typical report card was 2 Cs, 3 Ds, and an F.

And in sixth grade, they never let me graduate on stage.

In junior high, they wrote a letter saying, well, you know, he's not really a junior high school graduate.

He hasn't got enough credits or whatever.

And the vice principal said to my mother, you know, Mrs.

Orfila, maybe 1 day if Paul can really apply himself, he could learn to lay carpet.

And my mother came home and said, I think he can do more than that.

So I'm, I'm not a grade school or junior high school graduate, but I have a high school woodshop degree and I was able to graduate.

Going back to your family, your dad had a textile, he manufactured women's clothing.

I think you had some uncles who had liquor stores and bars.

And so basically the idea, sounds like from an early age, the model that you saw around you was people starting their own businesses, not going to work for some other company.

My mother would say, honey, you know, you work for other people.

You're only as good as yesterday's paycheck.

There is no encouragement to work for other people.

It was always about start your own thing.

Was that, do you remember, I mean, because I know the eventually you started junior college and then eventually you got in, you transferred to USC.

Was that in your mind from the moment you started college that I'm going to figure out a business to start or not quite yet.

I think in raising children, you have 1 of 2 choices.

They better be good at school, get an accountant, lawyer, whatever, do a profession, or they better be good with money.

And my parents encouraged me with money skills, saving, what to do with your money.

And I think when raising children, you better have a child with 1 of those 2 skills, money skills or school skills.

So how did you, from what I understand, like by the time you got to college, you had saved a little bit of money, right?

Like, but how did you, how did you save money?

How did you make money by the time you got to college?

And then back in those days, the farmers would send all their produce to a central market.

And the big markets would go from, say, 3 in the morning to 5 and 6 in the morning to buy all their stuff.

I would buy in the late market, the stuff that was left over, the peaches, the cantaloupes, the pineapples, I would buy that and sell it at my vegetable stand.

It was, for an example, there'd be, you know how a freeway goes and then there's a vacant lot And then I would have to stand right there, so I had a great visibility

right all right, so you are I mean you're you're sort of working your way through USC.

How was college for you when you got to USC?

Was it, I mean, I know that you were, you struggled in certain subjects in high school, but I guess you found it easier to work with numbers.

Yeah, I absolutely adored my finance classes.

Marketing I enjoyed, organizational behavior.

Now for an example, a professor would say, subchapter S corporation.

Everybody else is frantically taking notes.

I didn't have to take notes on those kind of things.

And I calculated at SC, I had so many Bs, you had to have an exact C average to graduate.

My last 16 units were all Ds because that's all I needed to graduate.

My diploma looks almost the same as everybody else.

So as long as you get the diploma it didn't matter what the grades were because the diploma looks the same.

Well I will tell you I learned I learned in school.

And I really did pay attention and I enjoyed college.

I never cut class, but I really did listen and I learned.

All right, so you graduate, you get your degree, but I guess while you are There, you notice something about copy machines.

and Xerox machines, right, had already been around for what, 15, 20 years by that point, but people were making photocopies.

Photocopies kind of became more and more common, I guess, while you were at college.

This place called Magic Machine, it was right by SC, they did Xerox copies for 3 cents a copy, and there were lines, unbelievably long lines.

Because people needed to read the chapters or whatever it was

Oh everything resumes to whatever you could just sit there people want to communicate and it's a great way for people to communicate their ideas

And this is in like 1969 and photocopy machines were like these giant things and and it took like a photograph like it was like there was like a flash of light for every copy, right?

And then it would come out and it was not, an amazing, facsimile of, of what you were copying, but it was pretty good.

even 1969, 1970 people probably thought these were amazing machines.

And, you could just see so many applications for it.

And what did you think when you saw that?

I mean, that immediately triggered an idea in your mind to open up your own copy machine shop?

If people are in line, that's a big sign of success.

Overnight, my inventory rotted, my cucumbers, my corn.

And I looked at the Xerox machine and I thought, man, that paper does not go obsolete.

That inventory stays there for months and months at a time.

And I thought, I don't want to be in a business where I have to fight my inventory.

And what does a long line mean to you when you see a long line

So you you decide all right, I'm gonna open up a shop a photocopy shop First of all, we didn't open it in LA you opened it in Santa Barbara, which is an hour and a half north of LA.

I had a girlfriend up here in Santa Barbara, and I was up there, and it just so happened that they didn't have a copy shop.

And I like the town, so I figured, well, if they're copying at USC, why wouldn't they copy in Santa Barbara?

Now, I didn't have to do an elaborate business plan.

If they're doing it here, they'll do it there.

I mitigated my risk by the fact that students are similar in both campuses.

So all right, I'm assuming that at that time, this is 1970, most students, if they photocopied anything, went to the school library to do it in the school library's machine, right?

In fact, the campus had free labor, they got better contracts on their Xerox machine.

So I'm competing not on a level plane, but I'm competing in an un-level plane with the government.

And pure competition, price is the determinant why people buy.

I had to outfox the college campus in getting that business started.

How much was, do you remember how much the college was charging at the library for a copy?

So you had to beat that or make it a better experience in order to make sure your business is going to work.

Well, I beat him because as my volume went up, my marginal costs went down that I could make a profit at 3 cents a copy.

So you decide to open up a location, a copy shop.

I have to imagine in 1970, that was not a small purchase.

I mean, it was probably gonna be really expensive.

So first of all, how did you get the money to, to, to do all this?

Well, I borrowed $5, 000 from Bank of America with my dad's signature.

Wow, so the bank was willing to give a 22 year old kid with no experience a $5, 000 loan at that time?

Well Xerox in those days rented you the machine.

were, I'll tell you what really built that business Xerox was so screwed up in their invoicing.

It gave me an enormous amount of float I wouldn't get a bill from a Xerox machine for say 60 days 90 days after it was installed Wow, And I didn't have to put up any money to get it.

So you'd have to put any money to get the machine.

So you got the machine and then they would bill you a fee to basically, you know, rent it and then to maintain it and then for the ink and toner and all that stuff?

Do you remember how much it cost to rent the machine at the time?

a month, and the variable cost after that was 1 half a cent.

So for an example, if I did 100, 000 copies, my cost would be 1, 100 plus a half a set or $500 for

And I could sell it for 4 cents, that's $4, 000.

Plus I charged extra for colored paper and legal size.

So my average sale was about 4 and a half sets.

That's a lot of money to rent a copy machine at that time.

And so that would be 9, 000 in revenue and my cost would be a 2000 a month say.

So you knew just doing the math that you could make money off this immediately, that this could be profitable.

So you, so you, you, you get this machine and Xerox doesn't even, you don't even need to put any money down.

They bring it in and you find a, and how big was the space that you found?

It was the size of a lunchroom, a hundred square feet,

So it was, that's enough room for a counter.

Counter and the machine and maybe 4 or 5 people in there, that's it.

No, no, customers came, they came outside.

They would give you the document and you would copy it for them.

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Kinko’s: Paul Orfalea